Soda Ash Safeguard duty of 20 percent on imports to India from China levied, as importer becomes jittery

As per the information received from one of our sources and after having a conversation with the buyers and supppliers it is learnt that the detergent and glass manufacturers in India have crossed swords.The bone of contention is the Department of Revenue’s notification of April 21 to impose a 20 per cent safeguard duty on imports from China, a move contested by the industry. The notification said, increased imports of soda ash into India from China had caused “market disruption in the domestic soda ash industry.

The soda ash industry in India essentially comprises five firms — Tata Chemicals, Gujarat Heavy Chemicals, Saurashtra Chemicals, Nirma and DCW. The duty will remain in force till November this year.The decision on safeguard duty follows representations from the five companies complaining that imports from China surged and were affecting their interests. The share of imports of soda ash from China as a proportion of domestic production has risen from 0.44 per cent in 2005-06 to 2.59 per cent in April-September, 2008-09.

Safeguard duty is a temporary measure, which is brought in for a certain period to protect the domestic industry from cheap imports.However, the domestic detergent and glass manufacturers have decided to sue the Directorate General (DG) of Safeguards on whose recommendation the safeguard duty was imposed. According to them, the initiation of safeguard duty investigation on soda ash imports began with the Alkali Manufacturers Association of India submitting its petition on January 14. Within just two working days, the DG Safeguards, without comprehensive verification of the voluminous data, issued a notification initiating an investigation for imposition of safeguard duty on imported soda ash. In its notification of January 16, initiating safeguard investigation, the DG Safeguards invited views of all interested parties up to February 16.Sources in the detergent and glass industry said even without waiting for its own deadline of February 16 for response from interested parties, the DG went ahead and notified preliminary findings through a notification on January 30, without giving a “fair hearing” to the affected parties. This, they said, was against principles of natural justice.The reason for the consumer industry’s opposition is because of soda ash making up over a quarter of the raw material cost of detergent products.

Besides, the total imports of soda ash are less than 10 per cent of the domestic installed capacity and imports from China are hardly 2-3 per cent of installed capacity in India. Also, there was practically no rise in imports during the April-September, 2008-09 over 2007-08 (only 0.09 per cent, or 21.5 million tonnes).The volume of imports was unlikely to hurt the domestic industry and the imports simply helped in keeping domestic prices in the highly-cartelised local industry in check, the consumer companies said.

When the international prices of soda ash (2006, 2007 and January to August 2008) were rising, the domestic soda ash manufacturers also raised their prices simultaneously without any co-relation to their actual low cost of production following the import price parity policy. The international prices were rising due to an increase in the cost of crude, energy, coal, coke lime, salt and ocean freight.

After August 2008, the international soda ash prices have fallen 40-60 per cent only because of the fall in the cost of crude, energy, coal, coke lime, salt and ocean freight. Consuming firms also said the domestic soda ash industry has already benefitted from a 10-15 per cent advantage, from the customs duties and other charges like ocean freight, marine insurance and commission charged on imported soda ash. In addition to that, from August 2008 to mid-March, 2009, the local industry enjoyed a further 21 per cent cushion on account of the depreciating rupee.

The case for a stay on the order has been filed by the All India Glass Manufacturers Association and the All India Detergent Manufacturers Association apart from a few companies like Hindustan Unilever and Saint Gobain.